Treasury Departments Run with Smaller Staffs

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Lean and mean, and less expensive. Most companies continue to focus on containing costs and minimizing headcount in their treasury departments, according to the Association for Financial Professionals’ Treasury Benchmarking Survey, released Tuesday.

After years of finding efficiencies in treasury and doing more with less, finance chiefs across the globe are somehow operating the function even more cheaply, at least on average.

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The median total cost of treasury operations for all companies surveyed by AFP was 84 cents per $1,000 of revenue, or about $840,000 for a $1 billion-revenue company. That compares with $980,000 for a $1 billion company in 2012. The highest performers in the survey did even better: a median of 28 cents per $1,000 of revenue in the 2013 survey, compared with 24 cents in 2012.

On a relative basis, companies under $100 million in revenue spent the most on treasury; the median was $6 per $1,000 of revenue, or about $600,000 for a $100 million company. Privately owned companies spent more per $1,000 of revenue than publicly trade ones. (Click here for the chart.)

With personnel costs (including salaries, wages, benefits and bonuses) making up such a large chunk of the budget, it’s no surprise that cost-conscious finance departments are keeping treasury’s headcount down, or perhaps even cutting it.

The typical organization among the 554 responses to the 2013 AFP survey had four full-time- equivalent (FTE) employees in its treasury function, compared with 4.35 in 2012. The highest-performing treasury operations had 1.36 FTEs, compared with 1.46 in 2012. Companies in the retail/wholesale, government and services industries had the highest median number of FTEs, AFP found, while companies in the energy and manufacturing industries had the fewest.

Although overall costs and staffing numbers are down, the average company did not reduce the number of employees it took to perform certain treasury activities. For example, it still took the average respondent company 1.17 FTEs to perform ongoing cash-management activities, about the same as last year.

In other measures of output, the AFP found that treasury departments have some but not much room to get more efficient. For example, the average company among the respondents took four hours to develop a short-term cash-flow forecast, while the highest performers took two hours. Likewise, the average organization took two days to resolve a bank account discrepancy, compared with one day for the highest performers.

When operating a lean treasury department, AFP pointed out in its report, policies and procedures are critical. Sixty-nine percent of all respondents told AFP that their companies’ embrace enterprise-wide standards on investment management, customer credit evaluation and counterparty credit risk assessment, among other functions. However, 16 percent of respondents said they either had no enterprise-wide standards or did not see any value in them.

In one unrelated finding, 52 percent of survey respondents said their treasury departments are still managing cash manually or using spreadsheets. Only 9 percent are using a bank treasury-management platform.

Explains AFP: “The majority of companies utilize the flexibility and simplicity of spreadsheets. Oftentimes, enterprise resource planning modules or a treasury workstation’s cash forecasting capabilities are not specific or customizable enough to fulfill a company’s needs.”